Economic Key Facts Germany

Germany is the third largest economy in the world after the United States and China, making it the largest economy in Europe. It is also the third largest export nation in the world. At 70%, the service sector accounts for the largest share of the country's gross domestic product.

Even in 2024, the German economy is expected to experience sluggish growth, if at all, due to the continuing uncertainties. Consumers are saving, and companies are holding back on investments. The fact that the Federal Constitutional Court declared the Second Supplementary Budget Act 2021 null and void in its ruling of 15.11.2023 will also have an impact. As a result, money to overcome the coronavirus crisis may not flow into the climate fund, which is already firmly planned The result is a budget gap of EUR 17 billion in 2024 that will have to be bridged through savings. Weak foreign demand, particularly from China, is also hampering the outlook. If the economic and geopolitical risks gradually subside this year and inflation continues to fall, economic growth could pick up again.

Insights into global growth prospects, challenges and threats are provided by our Global Economic Outlook. Our CEO Outlook showcases the views of more than 1,300 CEOs on future global economic development and the major issues of our time.

The economic research institutes' current forecasts for GDP growth in Germany vary between -0.5% and +1.3% for the 2024 financial year.

In December 2023, exports of goods slumped by 4.6% compared to the previous month of November 2023 to EUR 125.3 billion - the biggest decline in a year. Imports even fell by 6.7% to EUR 103.1 billion in December, which is also the biggest drop in a year.

Due to the unexpectedly weak year-end figures, German exports also fell for the year as a whole: compared to 2022, exports fell by 1.4% to EUR 1,562.1 billion. Imports fell even more sharply, dropping by 9.7% to EUR 1,352.5 billion. This leads to export surplus nearly doubling to almost  almost EUR 210 billion (2022: EUR 88.6 billion).

The global economy is still too weak to generate momentum in Germany's export-oriented economy. The export sector is facing another difficult year in 2024. The tensions in the Red Sea are also creating new trade risks. Companies' business expectations confirm this trend. In January 2024, the index published by the ifo-Institute fell for the third time in a row to its lowest level since September 2023.

After rising at the end of 2023, inflation fell at the start of the new year. Consumer prices in January 2024 were 2.9% higher than in the same month last year. This is the lowest figure since June 2021. In December, nationwide inflation was still at 3.7%.

Cheaper energy purchases were responsible for the fall in inflation. Consumers paid less for energy such as natural gas and electricity in January 2024. Energy prices were 2.8% lower than in the same month last year. The price rate for food rose by 3.8% and therefore significantly higher than general inflation.

Economists expect the inflation rate to fall further in the current year. However, the decline is likely to be bumpy. According to the ifo-Institute, more consumer-related companies want to increase their prices in the coming months.

The economic research institutes' current forecasts for the development of the inflation rate in Germany point to further declines and fluctuate between +2.1% and +3.5% for the 2024 financial year.

The unemployment rate in Germany rose in the first month of the year - as is usual for the season - to 2.8 million. The current rate is 169,000 people more than in December 2023 and 189,000 more than in January last year. The unemployment rate rose by 0.4 percentage points to 6.1%.

Employment and demand for labor remain constant, meaning that the labor market is stable at the start of the year despite the ongoing economic weakness. The situation on the training market remains difficult. Many apprenticeships offered by companies cannot be filled.

Women in Germany are still paid significantly less than men. The gender pay gap remains stagnant. This applies to pay overall as well as to pay for comparable jobs and qualifications. Across all jobs, women earned an average of 18% less per hour than men in 2023. Women received an average of EUR 20.84 per hour, men EUR 25.30. For comparable jobs, the gap was six percent.

There are many reasons for the gender pay gap between women and men. On the one hand, women are more likely to work in lower-paid sectors, professions or jobs than men. Women also still find it more difficult to advance to better-paid positions Women also continue to encounter greater challenges in progressing to higher-paying roles. Despite holding similar positions, qualifications, and career trajectories, women are paid on average less than men. In this direct comparison, women's pay remained six percent lower than that of their male counterparts.

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